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Psychology Of A Trader: How To Deal With FOMO?

Have you ever caught yourself in a situation where you feel anxiety over the fear of missing out on a specific trading opportunity? If yes, you should learn how to cope with this. If not, you’d better explore this issue now because forewarned is forearmed. This article maps out the core of FOMO syndrome in trading, how it interferes with your trading career, and advice on how to overcome it.

What is FOMO in trading?

FOMO is an acronym for the “Fear of Missing Out,” a widespread psychological issue among traders. FOMO happens when a trader feels unease over the fear of losing a potentially profitable trade. We are all well aware that the decision-making process is a bumpy road, especially in trading. Sometimes, traders obsessed with high returns become emotionally unstable and make mistakes out of greed or a sense of failure. So these unreasonable decisions ruin traders’ potential success.

FOMO behavior in trading

Oftentimes, the phenomenon of FOMO takes place when traders compare themselves to those successful professionals with high achievements and untold wealth. An everyday trader yields to despair and follows the market trends without comprehensive analysis and a clear mindset to reach for the perfect image of a trader.

For example, FOMO appears when a bullish trend grows. Your trading is affected by the market sentiment, news, and the growing excitement to enter or exit the market over the steady price growth. So, FOMO clouds traders’ minds and forces them to make decisions based on fear due to lost profits. Let’s say you open a trade at the peak of the growth. Then, the market is pulling back, and you still don’t close a trade because of FOMO, thinking it’s not the end. However, the long-lasting downward trend occurs, and you realize your failure.

In trading, FOMO is a tendency to make a trade under the pressure of herd instinct, social media influence, or a sense of jealousy, forgetting about strategy. Millions of traders still regret not purchasing bitcoins when they cost a paltry sum. The same about Tesla shares when the company hit the market in 2010 with an initial public offering of $17 per share. Traders believe they missed a great chance to become wealthy and successful by raising the price of these assets, while others managed to earn millions and billions of dollars. As a result, they have FOMO for next similar chances. Posts on social media from the allegedly successful traders only fuel FOMO.

Another FOMO behavior is to re-enter the market, moving in the same direction after profit taking. These traders suppose that by making a profit on half of the market trend, they lose to more forward-thinking traders. So, they seek to immediately correct the situation by re-opening the positions.

FOMO drives traders to act impulsively by feeling regret, greed, and jealousy. That’s why their guiding star is many unworthy factors but not a comprehensive market analysis with a well-planned trading strategy. Major market makers never miss the opportunity to manipulate the traders with FOMO by provoking them to make unreasonable decisions. Most of those who follow the crowd eventually lose. By the way, about 56% of traders suffer from FOMO.

The features of a FOMO trader

Here we’ve prepared a list of characteristics of a FOMO trader:

The factors that can cause FOMO

Since FOMO is a psychological condition, various triggers can cause it in traders' minds. Let's discuss some of these triggers.

Why FOMO is fatal for traders

As we have already mentioned, FOMO is quite destructive for traders. It’s a high barrier to your improvement as a trader, blocking the sound mind and rationality in trading. All traders should do their best to avoid FOMO. These are some reasons why:

How to Handle FOMO

FOMO is your enemy, and you must know how to suppress it on your way to high trading achievements. Here we’ve prepared a list of tips on how to prevent the fear of missing out:

Bottom line

All in all, FOMO is a destructive behavior that causes inevitable significant losses and destroys your trading career at large. Dealing with FOMO is an essential skill in trading because, with a developed psychological side, it is possible to become a professional with stable returns. Our guides and recommendations will help you to overcome FOMO and grow as a trader. Join us and create your legendary trading path.


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